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Monday April 21st 2014



Covered California Announces Health Plans & Rates


• Covered California Announces Health Plans & Rates
• CE Health Courses
• Cigna Settles Over LTD Claims
• Anthem Suspends Mail Order Drug Requirement
• African Americans – A Prime Market for Life Insurance & Financial Planning
• Annuity Sales Fall
• UL Policies Are Being Re-priced
• Spending on Specialty Medications Likely to Increase 67% through 2015
• Seniors Appreciate Part D Preferred Pharmacy Plans
• Pelosi Addresses ACA
• Voluntary Takeover Sales Increased Again in 2012
• Web-based LTC Sales System
• Healthcare Engagement Video Series
• ADA Compliance Guide for Producers and Employers
• Annuity Best Practices Webinar Tomorrow
• Managing Healthcare Costs for Employers

Covered California Announces Health Plans & Rates

CoveredCAAnnouncementThirteen health insurance plans will offer health care coverage through the Covered California health exchange in 2014. The plans are a mix of large non-profit and commercial plan leaders, along with well-known Medi-Cal and regional plans.

The rates for individual plans through the exchange vary from 2% above to 29% below average 2013 premiums for small employer plans in California’s most populous regions. Additionally, exchange plans limit annual out-of-pocket costs to $6,350. Covered California plans include the largest health insurers in the individual market as well as new entrants, regional plans, and local MediCal plans. The following health plans will participate in the exchange:
• Health Net
• Kaiser
• Anthem Blue Cross
• Blue Shield
• Alameda Alliance for Health
• Chinese Community Health Plan
• LA Care Health Plan
• Molina Healthcare
• Sharp Health Plan
• Valley Health Plan
• Ventura County Health Care Plan
• Western Health Advantage

Three of the nation’s largest players in the employer-sponsored insurance market – UnitedHealthCare, Cigna, and Aetna – will not be selling plans through the California exchange.

Brokers will be able to sell any plan in the exchange, according to Michael Lujan of Covered California who spoke at the LAAHU conference in Los Angeles last week. He urged brokers to get familiar with the plans in order to be ready for open enrollment in October. Renee Casserly of Blue Shield said that, as a broker, you should maintain contact with your clients and let them know that you are able to help them purchase plans under the exchange. She noted that carriers will begin sending out information about the exchange to individual policyholders in September.

Consumers will have a choice of HMOs, PPOs, and exclusive provider organizations (EPOs). Plans that were chosen for the exchange agreed to reduce profit margins down to 2% and 3% and embrace ACOs and medical homes.

In Los Angeles, Orange, San Bernardino, San Diego and Riverside counties, Health Net expects to offer its new tailored-network HMO exchange product, “CommunityCare,” which will be built around local health care providers. Steve Sell, president of Health Net’s Western Region Health Plan said the company will work to ensure that the medical groups, individual physicians and hospitals are committed to comprehensive care coordination and offer freedom of choice in selecting eligible in-network primary care physicians. Health Net Life expects to offer individuals PPO exchange products in the Northern California counties of Contra Costa, Kern, Marin, Mariposa, Merced, Monterey, Napa, San Benito, San Joaquin, San Francisco, San Mateo, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus and Tulare.

Molina Healthcare will participate in Los Angeles, San Diego, Riverside, and San Bernardino counties. “Our goal is to work with low-income or uninsured,” said J. Mario Molina, MD, president and chief executive officer for Molina Healthcare.

Kaiser Health news reports that nearly three dozen health plans submitted bids to sell their products in the competitive marketplace, and 13 were selected. Exchange officials rejected bids that were priced too high or failed to have robust networks of doctors and hospitals.

Premiums vary depending on the geographic region, the consumer’s age, and the richness of benefits. For example, a 25-year-old in Los Angeles could choose a Health Net catastrophic plan for $117 a month or choose a Bronze plan for $147 a month from L.A. Care, the nation’s largest public health plan. If the 25-year old earns less than about $45,600 per year, they would qualify for a subsidy to bring the cost of the premium down further.

More than half of Californians will be eligible for federal income tax credits for exchange plans. A 40-year-old in Los Angeles who earns $1,915 a month, or 200% of the federal poverty level, would pay a monthly premium of $90 for a Health Net HMO Silver plan in 2014.

The monthly premium would be $332 to $476 for a Silver plan for a 40-year-old individual in Sacramento. That includes federal subsidies, on a sliding scale, for a man or woman with income up to $45,960. Individuals who are eligible for the highest subsidy ($276 per month) would have out-of-pocket premium costs as low as $56 per month. Californians would receive federal subsidies on a sliding scale, extending to a family of four earning up to $94,200. For more information, visit

CE Health Courses

Word & Brown General Agency announced the final series of classes this year for California brokers to earn their designation as a Certified Insurance Professional (CIP). The upcoming certification course covers advanced product and service concepts for brokers who want to build their business.

From June 4 through July 26, two-day courses will be conducted in eight locations throughout the state:

  • Glendale (June 4 and July 9)
  • Fresno (June 5 and July 10)
  • Rancho Cordova (June 6 and July 11), Inland
  • Empire (June 12 and July 18)
  • Orange (June 13 and July 2)
  • Concord (June 18 and July 25)
  • San Jose (June 19 and July 26)
  • Carlsbad (June 28 and July 16).

For more information, visit

Cigna Settles Over LTD Claims

California and three other states have settled with CIGNA over claims handling practices for long-term disability insurance. The settlement is the result of individual examinations by the insurance departments of Calif., Conn., Maine, Mass., and Penn.

Insurance department officials cite claim handling irregularities, such as not giving enough consideration to the medical findings of independent physicians, workers compensation records, or Social Security Disability decisions.

Cigna is re-evaluating certain claims and has set aside $77 million to pay policyholders whose claims were handled improperly. CIGNA is paying a $500,000 penalty to the California Dept. of Insurance. The company is also paying $150,000 to reimburse the department for the cost of ongoing monitoring required under the settlement agreement.

Cigna must do the following under the settlement agreement:
• Improve the claims handling.
• Apply enhanced claim procedures to certain previously denied or adversely terminated claims.
• Participate in a 24-month monitoring program, conducted by the insurance departments, involving random sampling and ongoing consultation.
• Undergo a re-examination upon completion of the monitoring period.
• Pay $1.7 million in fines and administrative fees to the five states involved in the settlement.

Anthem Suspends Mail Order Drug Requirement

A court approved settlement between Anthem Blue Cross and Consumer Watchdog gives patients more options for purchasing HIV/AIDs medications.  The settlement eliminates the requirement that Anthem policyholders can only use a mail order pharmacy for theses medications.


African Americans – A Prime Market for Life Insurance & Financial Planning

Compared to the general public, African Americans base financial confidence on a broader array of factors than asset accumulation and macroeconomic factors. Financial confidence includes life insurance protection, level of debt and expenses, and health care costs, according to a Prudential study.

African Americans own insurance products, such as life and disability, at equal or greater rates than the general population, but are only half as likely to own investment products, such as IRAs, mutual funds, stocks, and bonds.

Nearly half of African Americans have a 401(k) or other workplace retirement plan, and 80% of those eligible are contributing. However, African Americans’ balances within employer plans are less than half those of the general populations’ due, in part, to loans and withdrawals. Thirty percent have taken loans from their plan, citing the need to repay other debt.

“The study demonstrates increasing economic power and an emerging middle class,” said Charles Lowrey, Prudential’s chief operating officer. About 40% of African-American households surveyed have annual incomes of at least $75,000, and nearly a quarter earn $100,000 or more. Half of African Americans surveyed say they are better off financially than a year ago while only 19% say they say worse.

African Americans generally own more protection-oriented financial products, rely more on faith-based organizations for financial education, and retire earlier. Also, women make more the household’s financial decisions compared to the general population.

However, only about a quarter of African Americans say financial services companies have supported their community effectively. African Americans are 13% less likely to have been contacted by a financial advisor compared to the general population. While half of African Americans say working with an advisor would help them make better financial decisions, only 19% have an advisor.

African Americans are more optimistic about their financial future compared to the general population.  African Americans provide financial support to unemployed friends and family at nearly double the rate among the general population. College-educated African Americans are twice as likely to have student loan debt. For more information, visit

Annuity Sales Fall

Total annuity sales fell 6% in the first quarter of 2013, according to a LIMRA study. Variable annuity sales were down 4% for the sixth consecutive quarter of declines. However, this was 1% higher than in the fourth quarter of 2012. VA guaranteed living benefit election rates were steady at 84% in the first quarter.

Joseph Montminy of LIMRA said, “VA sales continue to struggle despite sustained equity market gains. All significant fixed annuity product types declined in the first quarter of 2013. In many ways, the current market is more challenging to many annuity manufacturers than the recent financial crisis.”

Total fixed annuity sales slipped to $16.2 billion in the first quarter, falling 11% compared to the prior year. This is the eighth consecutive quarter of declines. After record high sales in 2011 and 2012, first quarter indexed annuity sales dropped 4%. However, election rates of guaranteed lifetime withdrawal benefit (GLWB) riders on indexed annuities remain strong. In the first quarter, 72% of consumers elected a GLWB rider, when available. LIMRA estimates that 88% of indexed annuities products in the market offer GLWB riders.

Sales of deferred income annuities (DIAs) were 147% higher than in the first quarter of 2012. Since the start of 2012, four companies have entered the DIA market. The growing interest in this market has spurred existing players to launch new or refined products while others are exploring whether to enter the market.

Fixed-rate deferred annuity sales experienced another quarter of steep declines, down 25% in the first quarter. To put this into perspective, sales of fixed-rate deferred annuities in are down 80% in four years. Book value sales declined 26% in the first quarter and market value adjusted sales were down 23% compared to the first quarter of 2012. For more information, visit

UL Policies Are Being Re-priced

Thirteen of 28 universal life (UL) and indexed universal life (IUL) carriers have re-priced their UL with secondary guarantee design policies in the past 12 months. The majority that re-priced increased premium rates.

What may be driving re-pricing and plan modification is the fact that seven of these 13 survey respondents fell short of their profit goals through the first nine months of 2012.  Interest earnings are cited as the primary reason for failing to meet profit goals. Recent regulatory changes (Actuarial Guideline 38) are also driving expected modifications to secondary guarantees.

Sales of UL products with chronic illness riders as a percent of total UL increased from 11% for calendar year 2011 to 14% for the first nine months of 2012.  As a percent of total UL sales, inclusion of LTC riders on UL products increased from 15% for 2011 to 16% for the first nine months of 2012.  More companies are beginning to offer and track such products and nearly 79% of survey respondents expect to market a chronic illness or LTC rider in 12 to 24 months.

The IUL market continues to draw considerable interest with more companies entering the market. Total IUL sales (as a percentage of total UL and IUL sales) has increased from 18% in 2009 to 40% through the first nine months of 2012.  This product is attractive in today’s environment due to its upside potential and downside protection.

Some carriers expressed concern about the net premium reserve floor being included in the valuation manual.  The valuation manual sets forth regulatory requirements for principle-based reserves for UL products.  They cite the following reasons for concern:  the net premium reserve is too high, the significant amount of work in implementing the new regulation with little reserve relief, and potential tax implications.  For more information, visit


Spending on Specialty Medications Likely to Increase 67% through 2015

U.S. spending on specialty prescription drugs will increase 67% by the end of 2015, according to a forecast by Express Scripts. Specialty medicines are prescription drugs that require special handling, distribution, and administration. Many are biologics that are delivered via an injection or an infusion to treat chronic, complex diseases.

“The very high cost of these drugs creates difficult decisions for plan sponsors on which medicines to cover,” said Glen Stettin, M.D., of Express Scripts. By the end of 2015, drugs for cancer, multiple sclerosis, and inflammatory conditions, such as rheumatoid arthritis, will command higher drug spending than any other therapy class except diabetes .

Hepatitis C drug spending is expected to quadruple over the next three years, which is, by far, the largest percentage increase among therapy classes. The reason is that interferon-free medications are expected to gain FDA-approval in 2014. Also, new screening guidelines are expected to increase the number of people diagnosed with Hepatitis C.

Dr. Stettin said, “Plan sponsors can greatly improve the utilization trend and spending…by taking control of the pharmacy benefit.” A recent study demonstrated that payers who implemented Express Scripts’ cost management and patient care programs achieved 50% lower increases in specialty drug spending. Plan sponsors also saw higher medication adherence rates, which equates to better health outcomes and cost savings. Hepatitis C patients who received specialized clinical care from Express Scripts’ specialty pharmacy were 60% more likely to achieve an optimal adherence level, which leads to medical savings by curing the patient and avoiding further disease progression.

Also, safe, effective, and less-costly alternatives could become available once patents expire on marketed biologics. The country would save $250 billion from 2014 to 2024 if the 11 most likely biosimilar candidates were launched, according to Express Scripts.

Spending on traditional prescription drugs to treat common conditions will decline 4% by the end of 2015, largely because of the availability of generic medications. Only two of the top 10 traditional therapy classes, diabetes and attention disorders, are likely to see spending increases over the next three years, but those increases will be significant. Despite the availability of generic equivalents for many attention disorder therapies, spending is expected to increase 25% over the next three years due to higher utilization among middle-aged adults as well as wide geographic variation in diagnosis. Also, diabetes-medication spending is expected to rise 24% because of high prevalence and new therapies. For more information, visit

Seniors Appreciate Part D Preferred Pharmacy Plans

Eighty-five percent of seniors say they are satisfied with Medicare Part D plans that offer preferred pharmacy networks. They cite lower costs, convenient access to pharmacies, as well as other benefits, according to a survey from Hart Research Associates by the Pharmaceutical Care Management Association (PCMA). More than 40% of Part D seniors are enrolled in plans with preferred networks. Eighty percent of those in preferred pharmacy plans say they would be very upset if their plan were no longer available.

“Seniors see Medicare Part D preferred networks as a ‘win-win’ because they offer good value without sacrificing access to convenient pharmacies,” said Geoffrey Garin, president of Hart Research Associates.

The study also reveals the following:
• The cost of premiums (50%) and copays (48%) are the most important considerations for seniors in selecting their preferred pharmacy plan.
• Seniors are very satisfied with the convenience of pharmacies (81%), the number of pharmacies in their network (74%), and the prescription medications available through their plan (75%).
• Cost is the top factor for seniors regardless of income, age, number of medications, and distance from their drugstore.
• Only 8% listed the number of pharmacies in the network as an important consideration.

For more information, visit

Pelosi Addresses ACA

House Minority Leader Nancy Pelosi, D-Calif., held her weekly press conference in the Capitol Visitor Center. Below is a summary of her comments related to the Affordable Care Act:

The nonpartisan Congressional Budget Office told Speaker Boehner that repealing the Affordable Care Act would increase the deficit by $109 billion over the next 10 years – $109 billion. Not only is this a vote that jeopardizes access to affordable quality healthcare, it is a vote that explodes the deficit. One hundred and five million Americans are already receiving free preventive services. More than 100 million Americans no longer face a lifetime limit on their health coverage. Seventeen million children with preexisting conditions are no longer denied coverage. Soon being a woman will not be considered a preexisting medical condition. As you see, these are already in effect — we have preventive services, coverage for young adults and children. As you know, many more provisions are there. Six point six million young adults up to the age of 26 have taken advantage of the law to obtain health insurance through their parents’ insurance policies; 6.3 million seniors in the donut hole have saved $6.1 billion on the prescription drugs.

Q: What is your reaction to Secretary Sebelius asking the health insurance industry for funds to implement the healthcare law? And also, have you ever asked anyone to contribute to a 501(c)(4)?

A: Leader Pelosi. When the Republicans passed the Medicare prescription drug bill in the beginning of president Bush’s term, they spent a fortune of public dollars promoting it…That was their responsibility to get people to sign up. That is the responsibility now. So, I think that that initiative is one that they – who should they be to criticize something they did to the hilt?

Secondly, when we were passing the Affordable Care Act, there were hundreds of millions of dollars spent during the debate misrepresenting, mischaracterizing – I don’t like to use this word – lying about what was in or not in the Affordable Care Act. It was going to be death panels, it was going to be abortion, it was going to be this, that, and the other thing – none of which was true. But, nonetheless, whether it was true or not, hundreds of millions of dollars spent by the private sector for this purpose.


Voluntary Takeover Sales Increased Again in 2012

Takeover sales now account for 45% of new voluntary sales premium – up from 42% in 2011, according to an Eastbridge study. A takeover sale is when one carrier’s plan is replaced with a similar plan issued by a different carrier. Gil Lowerre, president of Eastbridge expects competition to increase and more takeovers to occur as more employers move to a group platform product and benefit brokers sell more voluntary benefits.

Lowerre said, “We hope that brokers will recognize all the opportunities for virgin sales in the voluntary market. Today, approximately 32% of all employees are already covered by at least one voluntary product. However, that leaves about 68% of all employees who do not already own a voluntary product. All this is virgin business. While we expect to see the trend for takeovers to continue, there is still a significant amount of virgin business in the market. Employees often have the need for more than one voluntary product, and many employers continue to be open to adding more types of voluntary products, so brokers do not have to be content with just takeover plans.” For more information, visit


Web-based LTC Sales System

John Hancock launched “LTC Captivate,” a Web-based long-term care insurance selling system. It offers an educational component that supports face-to-face and remote selling scenarios. For more information, visit

Healthcare Engagement Video Series

Edgewood Partners Insurance Center (EPIC) released the first in a series of videos on how employers can help employees understand changes in the health care landscape and become better health care consumers. For more information, visit

ADA Compliance Guide for Producers and Employers

Liberty Mutual is offering a guide to help producers and employers comply with the Americans with Disability Act (ADA). For more information, visit


Annuity Best Practices Webinar Tomorrow

NAFA is sponsoring a Webinar to discuss best practices for insurance-only licensees. It will be held Thursday, May 30 at 8:30 a.m., PT.  For more information, visit

Managing Healthcare Costs for Employers

Castlight Health is holding a Webinar on how employers can manage appropriate utilization of care. It will be held June 4 at 9:00 a.m. PT. For more information, visit